The non-partisan Congressional Budget Office has estimated that 24 million fewer people will have health insurance by 2026 under the House GOP plan to replace Obamacare. That projection is unsurprising, and quite likely overstated. But what is surprising about the CBO report is the ways in which it makes the GOP bill look better than expected, and how it points to how the bill can be improved.

Democrats are gleefully, and understandably, touting the CBO report as proof that the American Health Care Act—the official title of the House GOP bill—would harm too many Americans. But as Lee Corso says on College GameDay, “not so fast, my friend.”

CBO’s poor track record with Obamacare’s exchanges

The first thing to know about the CBO is that it has long had problems modeling how a competitive, individual insurance market would work. This is reflected in their frequently revised estimates as to how many people would enroll in Obamacare’s insurance exchanges.

As the below chart shows, in 2010, when the Affordable Care Act was passed, CBO estimated that 21 million people would enroll in the ACA exchanges in 2016. The actual number was closer to 10 million. Even now, CBO believes that 18 to 19 million people will soon be enrolled in the exchanges, when in fact enrollment is degrading under current law. According to estimates I've published at the Foundation for Research on Equal Opportunity, Obamacare exchange enrollment will likely end up stabilizing at about 10 to 11 million.

Obamacare exchange enrollment projections over time from the Congressional Budget Office, compared to actual figures and future projections from FREOPP.org.FREOPP.org

This chart is relevant to our discussion of the GOP plan in two ways. First, it shows that the CBO is far from infallible; indeed, its projections of ACA exchange enrollment have been wildly off.

Second, as CBO notes in the first paragraph of its report on the AHCA, “CBO used its March 2016 baseline with adjustments for subsequently enacted legislation, which underlies the resolution, as the benchmark to measure the cost of the legislation.” That baseline is off by 7 to 8 million in future exchange enrollment; hence, the impact of the AHCA is also off by the same amount.

CBO ascribes near-magical powers to the individual mandate

An even bigger problem is that the CBO has long believed that Obamacare’s individual mandate has near-magical powers to compel people to buy health insurance. There is little evidence to support this claim.

In 2008, when Senator Barack Obama was competing with Hillary Clinton for the Democratic presidential nomination, he ridiculed Hillary’s support of an individual mandate. “If a mandate was the solution,” he said at the time, “you could try that to solve homelessness by mandating that everybody buy a house. But the reason they don’t have a house is they don’t have the money.”

When Obama gained the White House, he flipped, and became a supporter of the mandate. Why? Because the CBO told him that a mandate would increase the agency’s coverage estimates of his plan by 16 million. Maybe it should have been called “CBOcare.”

Even Jonathan Gruber—one of the law's most famous advocates—believes Obamacare's individual mandate is having little effect. In a 2016 article for the New England Journal of Medicine, Gruber and two co-authors wrote, "When we assessed the mandate’s detailed provisions, which include income-based penalties for lacking coverage and various specific exemptions from those penalties, we did not find that overall coverage rates responded to these aspects of the law." (Emphasis added.)

CBO on the other hand believes that, due to the AHCA’s repeal of the individual mandate, 14 million people would choose to go uninsured in 2018, and 16 million in 2019. Of the 14 million accounted for in the 2018 figure, 6 million would drop out of the individual market, 5 million from Medicaid, and 2 million from employer-based coverage.

Remember that Medicaid is basically free to the eligible enrollee. There are no premiums, and almost no co-pays or deductibles. The value of the Obamacare Medicaid subsidy is about $6,000 per enrollee per year. And yet, CBO believes that 5 million people will only enroll in Medicaid because the individual mandate forces them to. Given the difficulties in enforcing the mandate for low-income populations, this is highly unlikely.

Furthermore, CBO’s view that 6 million people in 2018 will be driven to enroll by the mandate means that of the 26 million 2018 enrollees in the individual market, nearly a quarter will be signing up primarily because of the mandate. That contradicts the real-world experience of insurers and actuaries, who say that the real proportion is closer to 5 percent.

CBO believes that Medicaid expansion will reach nearly every state

A key part of the CBO’s March 2016 baseline is an assumption that most of the states that have yet to expand Medicaid under Obamacare will soon do so. Hence, the House GOP plan will reduce coverage by 5 million people in the future, from states that have yet to expand Medicaid. Leaving aside the inherent subjectivity of this projection, there’s plenty of reason to believe that the CBO is wrong.

CBO assumes that if Obamacare remains law, its Medicaid expansion will spread to even more states, enrolling 5 million.Congressional Budget Office

The states that haven’t expanded Medicaid have done so because they are concerned about exposing their taxpayers to significant and growing liabilities that the federal government may back away from over time. Those liabilities aren’t getting smaller as time goes forward, but larger. It’s equally, if not more likely, that Medicaid expansion in new states accounts for fewer than 2 million more enrollees by 2026.

CBO coverage estimates could be off by as much as 19 million

You add all that up—7 million off on future exchange enrollment, around 9 million off on the individual mandate’s power, and 3 million off on future Medicaid expansions—the CBO’s estimate of the impact of the AHCA on coverage is off by around 19 million, and that the real impact of the AHCA on coverage is negative 5 million. (The actual effect could be larger or smaller, based on the interaction of the various factors I describe above.)

Another change Republicans should consider is to delay the repeal of the individual mandate until 2020. I dislike the mandate as much as anyone. But over the long term, the AHCA’s system of tax credits will be more successful if it begins with a carefully designed transition away from Obamacare.

Indeed, the CBO expressed a surprising degree of confidence that the AHCA’s policy mix—tax credits more favorable to young people, a 5-to-1 age ratio for premiums, an elimination of actuarial value mandates, and state innovation grants for high risk pools and risk adjustment—“would result in a relatively stable nongroup market.”

However, “in 2018 and 2019, according to CBO and JCT’s estimates, average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law mainly because of the elimination of the individual mandate penalties…Starting in 2020, the increase in average premiums from repealing the individual mandate penalties would be more than offset” by the new policy mix, leading to an eventual decrease in premiums by 10 percent relative to Obamacare.

Delaying the mandate repeal to 2020 would likely result in even lower premiums after 2020, and therefore higher enrollment numbers. It’s a simple change worth considering.

Is the CBO right about AHCA’s positive effects?

Given that I’ve spent most of this article criticizing the CBO’s coverage estimates, I should point out that I’ve been highly unsure that the AHCA would reduce premiums and lead to a stabler risk pool. The bill’s arbitrary 30 percent surcharge for those who buy coverage outside of open enrollment might actually make the risk pool less stable, and ought to be replaced by a much more flexible regulatory regime.

And we haven’t even gotten to the AHCA’s profound fiscal effects. The bill would cut spending by $1.2 trillion, and taxes by $883 billion, for a net deficit reduction of $337 billion. And that’s before you take into account the macroeconomic effects that those tax cuts would have on economic growth, and thereby on greater tax revenues.

Over ensuing decades, the fiscal impact would be even greater, because the bill entails the most significant effort at entitlement reform in American history. Incoherent GOP hard-liners like Rand Paul, who claim that the AHCA is a “new entitlement,” are displaying their unseriousness about a bill that reduces federal spending by more than $2 trillion over the next 20 years.

The bottom line: Republicans shouldn’t abandon the AHCA because of a superficially unflattering CBO score or its failure to meet their own purity tests. They should work all the more to correct its flaws. If they do, in 2020, the real world very well may vindicate them instead of the CBO.

* * *

UPDATE 1: Paul Demko of Politico has obtained a leaked copy of a report from the White House Office of Management and Budget estimating that "26 million people would lose coverage over the next decade, versus the 24 million CBO estimates." This news has been taken by some to suggest that the White House agrees with CBO's figures. But that's not correct.

As Demko notes in an updated version of the piece, the OMB report was an attempt to predict how the CBO would score the bill. "This is not an analysis of the bill in any way whatsoever," said a White House spokesman. "This is OMB trying to project what CBO's score will be using CBO's methodology." My sources confirm that this is the case—and it's not surprising. Designers of the AHCA needed instant feedback on how changes to their bill might affect the CBO score, and they deployed the OMB's career staff to help them do that. The Obama White House did the same thing with Obamacare.

I am Forbes' Policy Editor, and president of a non-partisan think tank, the Foundation for Research on Equal Opportunity (FREOPP.org), which develops policy reform ideas to expand economic opportunity to those who least have it. I'm on Twitter at @Avik. My work has also...